The Federal Open Market Committee’s (FOMC) optimistic outlook for inflation and GDP growth was accompanied by lowered expectations for the rate of unemployment. The Federal Reserve also announced its intention to continue with its asset purchase program, the monthly purchase of bonds worth at least $120 billion.
Present tense
The Federal Reserve’s two-day policy meeting this week comes against an interesting backdrop – rising expectations of a speedy recovery of the U.S. economy owing largely to the rollout of the coronavirus vaccine, yields on U.S. 10-year Treasury notes rising rapidly, escalating interest rates and risk of inflation.
The release of the President Biden’s $1.9 trillion economic rescue package only a few days ago, though welcomed by many, has added to elevated government borrowings and a burgeoning fiscal deficit. The U.S. Government has spent $5 trillion on economic stimulus packages till date.
President Biden’s $1.9 trillion stimulus plan: The price to be paid for relief
Federal Reserve Chairman Jerome Powell recently gave an indication of his intention to continue with an easy monetary policy, when, at the Senate Banking Committee held in February, he was quoted, “We’re 10 million jobs below where we were in February of 2020. 10 million payroll jobs. So, there’s a long way to go,” he said. “Monetary policy is accommodative, and it needs to continue to be accommodative … right now, we’ve had three months (averaging) 29,000 jobs a month. It’s not very much progress.”
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